Virgin Australia Financially Secure? [Now in Voluntary Administration]

[Spongbob]

For once a good and sensible media article without the hype and panic. Damning to JB and everything he did but his that is his legacy now.

The key problem with the strategy was JB took VA’s cost base to basically the same as VA but QF are able to extract premium pricing from the market which led VA to slowly bleed to death. VA simply didn’t win enough corporate / premium traffic. Just rats and mice. Then they inflicted their own wounds - VAi, Tiger and their disastrous foray to take on QFLink leaving them with aircraft they can’t use.

A return to DJ days appears to be the consensus strategy.


Back to the future strategy is Virgins best bet for survival

Virgin’s shift upmarket (even as Qantas was slashing its own costs) sacrificed almost all the cost advantage it had over the Qantas brand and allowed Jetstar to dominate the low-cost space, but predictably failed to shake Qantas’ hold on the corporate market

A remade Virgin needs to regain a material cost advantage over Qantas and to focus on the price-conscious end of the full-service SME and tourism and leisure markets

The administration and a new owner could do more, more quickly and brutally, than Scurrah was able to do while the business was operating normally.

Back to the future strategy is Virgin's best bet for survival

There is survival and profit in an old strategy for Virgin set up by its founder Brett Godfrey.

www.smh.com.au

I think there is an old marketing saying: "there might be a gap in the market, but is there a market in the gap?"

 

[jakeseven7]

I agree with you there - the unsecured creditors are the last to receive any payout - generally they are the ones that misses out at the end no matter which company goes bust in any industry

Will Velocity be considered an unsecured creditor given they were forced to siphon off $200 million to help prop up VA?

And how will that affect Velocity where members points are held?

Does anyone know if PS made this call the raid the Velocity trust or was it before his time?

 

[jase05]

Ever who buy the airline they would be stupid ripping all the j class out of aircrafts as it will cost more. hope they leave as is and maybe cut back all routes that have not made money and stick with lax and Tokyo where they had very good numbers and get rid of luke manghan j class meals and get some one fresh.

I really like the majority of Luke Mangan dishes, some absolutely superb meals over the years.
I really hope whoever buys them persists with J though. I’m only a very small fish in the scheme of things but we spent just under $60k with VA last year and I don’t really want to give that to the opposition. Might mean a drastic rethink of our domestic travel plans going forward

 

[hydrabyss]

Will Velocity be considered an unsecured creditor given they were forced to siphon off $200 million to help prop up VA?

And how will that affect Velocity where members points are held?

Does anyone know if PS made this call the raid the Velocity trust or was it before his time?

You may need to double check the news article but I thought I read it was a secured loan but I may be wrong.

 

[hydrabyss]

I was surprised to see who one of the potential investors might be for Virgin Atlantic. Singapore sovereign wealth fund Temasek.

https://www.thestar.com.my/business/business-news/2020/04/26/branson-seeks-buyer-for-virgin-atlantic

 

[HS-TQE]

Temasek via SIA couldn't make Virgin Atlantic work last time, so IMO I personally can't see how they'll make Virgin Atlantic work the second time around. That's even if Temasek are "dumb enough" to "buy back" the stake from DL.

 

[Bagpuss]

Administrator notices can be found here : Virgin | Deloitte Australia | Restructuring, Insolvency & Financial Advisory

Interesting comments in some documents, especially the circular to lessors.

 

[jakeseven7]

I really like the majority of Luke Mangan dishes, some absolutely superb meals over the years.
I really hope whoever buys them persists with J though. I’m only a very small fish in the scheme of things but we spent just under $60k with VA last year and I don’t really want to give that to the opposition. Might mean a drastic rethink of our domestic travel plans going forward

And I think your post underlines the issue VA had with its strategy. It simply didn’t attract enough of the big corporate customers to make their ‘full service lite’ strategy work.

 

[jase05]

And I think your post underlines the issue VA had with its strategy. It simply didn’t attract enough of the big corporate customers to make their ‘full service lite’ strategy work.

True, just a shame that there are so many wedded on QF corporates that for one reason or another are happy to pay more for an inferior product. VA just weren’t able to grab a bigger piece of the corporate pie unfortunately

 

[jakeseven7]

Unfortunately I think I must still be stuck in the 90's then hence the appeal for me. Jeez my run around work vehicle is a 90's commodore ute.

The 90’s hangover for the Virgin brand comes from how they used women in their early days.... I do note VA marketing has desperately being trying to move away from that image, but their advertising has been so ‘nothing’ and wishy washy since that most people still remember the old brand image I reckon.

DJ days of ‘visually appealing’ women strutting around fanning Branson and in their advertising is still quite memorable (Women on bathing suits even painted on their planes), and the Virgin brand did have some very negative PR when they were dragged through the courts for their hiring ‘processes’ cough - and lost, very publicly.

So the brand has a little bit of being stuck in the 90’s associated with it.

Not saying in anyway it’s been a major factor in their demise, but for moving forward - it is a brand name that has some baggage (Pun intended).

So I’m very much in the camp of if they can lose the brand name and start VA2 with a fresh approach they should take it.

 

[jakeseven7]

True, just a shame that there are so many wedded on QF corporates that for one reason or another are happy to pay more for an inferior product. VA just weren’t able to grab a bigger piece of the corporate pie unfortunately

But I guess that statement ‘inferior product’ is very subjective and different for every person. It may be inferior to you (for multiple reasons I’m guessing!) but clearly not inferior to most others (for multiple reasons). And that is why they were not successful.

 

[tomlee1986]

Will Velocity be considered an unsecured creditor given they were forced to siphon off $200 million to help prop up VA?

And how will that affect Velocity where members points are held?

Does anyone know if PS made this call the raid the Velocity trust or was it before his time?

This I don't have any details for - but I would not be surprised if it is a secured debt

 

[tomlee1986]

I was surprised to see who one of the potential investors might be for Virgin Atlantic. Singapore sovereign wealth fund Temasek.

https://www.thestar.com.my/business/business-news/2020/04/26/branson-seeks-buyer-for-virgin-atlantic

The fund "Temasek" is not doing as well as it should at the moment - this is because of the negative oil price last week - this is based on a youtuber in Chinese that studies these things often

 

[jase05]

But I guess that statement ‘inferior product’ is very subjective and different for every person. It may be inferior to you (for multiple reasons I’m guessing!) but clearly not inferior to most others (for multiple reasons). And that is why they were not successful.

Personally I think VA’s marketing has a lot to answer for and to me they don’t sell the product as much as they should. I still know many corporates that have never flown with VA and religiously stick with QF yet are always complaining about them. Whenever I ask them if they have considered swapping and I try to talk VA up I’m often met with the “I’m loyal to QF” or “I like earning QF points”. I know QF has been around for far longer but working in QF marketing must be the easiest job on earth
I’ve managed to get a few friends over to VA and they love it but whoever takes over the airline needs to do a far better job of promoting itself and even cold calling businesses if that’s what it takes

 

[Quickstatus]

VA’s marketing has a lot to answer for

Most corporates and substantial frequent flyers know that the marketing does not match the reality. VA network has never matched QF.
VA tended to attract the price conscious rather than the big spenders. I base this on the fact that whenever I catch the BueEmu bus from the carpark, the bus invariably empties when it gets to the VA dom terminal - few stay onboard to the the second stop QF dom.

 

[AIRwin]

I base this on the fact that whenever I catch the BueEmu bus from the carpark, the bus invariably empties when it gets to the VA dom terminal - few stay onboard to the the second stop QF dom.

JQ is also located at the same terminal...

 

[Quickstatus]

Correct but it's the same observation. JQ plus VA combined does not match the domestic market share of QF.

 

[Melburnian1]

True, just a shame that there are so many wedded on QF corporates that for one reason or another are happy to pay more for an inferior product. VA just weren’t able to grab a bigger piece of the corporate pie unfortunately

I know of one case where an entity with about 15-20 regular flyers approached VA for a 'deal' maybe three years ago and were swiftly told 'no we're not interested.'

No idea if this was a general attitude from VA but if it was repeated elsewhere, no wonder it didn't attract corporate passengers in the numbers desired.

 

[jakeseven7]

Most corporates and substantial frequent flyers know that the marketing does not match the reality. VA network has never matched QF.
VA tended to attract the price conscious rather than the big spenders.

Again, I really wonder if they had joined Star (YES I know why they didn't before I get screamed at) but if they had - their 'virtual' network would have been much much stronger with SQ being so strong in Aus... And would have attracted alot more of those high flying corporates who pay a premium for that access that QF provides with oneworld.

Honestly, I know that the administrators and new owners will probably take VA2 down market, I'm coming to accept that...

....But surely the new owners should look at least look at Star again?

Assuming a likely scenario where all their owners equity wiped out, thereby removing them all (and all the roadblocks they put in place).

- VA2 becomes 100% domestic, and therefore not a threat to NZ, SQ or UA
- VA2 ditches Delta as its US partner and teams up with UA feeding them Aus traffic
- NZ would drop QF in a heartbeat (they are just self described frenemies anyway) especially if VA dumped their TT service competing with NZ
- SQ would have their pseudo Aus airline in a nice little box, not threatening anyone

The biggest decisions VA2 would have to make would be to dump Delta (in favour of UA) and find the cash to stump up to join.

 

[jase05]

Again, I really wonder if they had joined Star (YES I know why they didn't before I get screamed at) but if they had - their 'virtual' network would have been much much stronger with SQ being so strong in Aus... And would have attracted alot more of those high flying corporates who pay a premium for that access that QF provides with oneworld.

Honestly, I know that the administrators and new owners will probably take VA2 down market, I'm coming to accept that...

....But surely the new owners should look at least look at Star again?

Assuming a likely scenario where all their owners equity wiped out, thereby removing them all (and all the roadblocks they put in place).

- VA becomes 100% domestic, and therefore not a threat to NZ, SQ or UA
- VA ditches Delta as its US partner and teams up with UA feeding them Aus traffic
- NZ would drop QF in a heartbeat (they are just self described frenemies anyway) especially if VA dumped their TT service competing with NZ
- SQ would have their pseudo Aus airline in a nice little box, not threatening anyone

The biggest decisions VA would have to make would be to dump Delta (in favour of UA) and find the cash to stump up to join.

I may be well off the mark but I don’t see that alliances have a future and many airlines will possibly pull out of existing alliances and enter into more partnerships.
I‘m probably wrong but just how I see it